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TMI Blog2015 (7) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid to the credit of any individual as rightly pointed out by the Ld. Sr. counsel. The assessee has to issue Form 16A prescribed under Rule 31(1)(b) of the Income-tax Rules, 1962 for the tax deducted at source. The assessee has to necessarily give the details of name and address of deductee, the PAN of deductee and amount or credited. In this case, the assessee could not identify the name and address of deductee and and his PAN. The assessee also may not be in a position to quantify the amount required for incurring the expenditure for dismantling and restoration of site to its original position. In those circumstances, this Tribunal is of the considered opinion that the provision which requires deduction of tax at source fails. Hence, the assessee cannot be faulted for non-deduction of tax at source while making a provision. - Decided in favour of assessee. Year-end provisions - Held that:- As find from the order of the CIT(Appeals) it appears that apart from identification and address verification, the assessee has also made provision towards ICU charges and lease line expenses, etc. From the order of the CIT(Appeals) it appears that the assessee also has to pay the vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are set aside - Decided in favour of assessee. - ITA Nos.320, 321, 322, 323, 324, 325, 326, 327, 328 & 329/Mds/2014,S.P. Nos.324, 325, 326, 327, 328, 329, 330, 331, 332 & 333/Mds/2015 - - - Dated:- 20-7-2015 - Shri N.R.S. Ganesan and Shri A. Mohan Alankamony, JJ. For the Petitioner : Sh. N. Venkataraman, Sr. counsel for Sh. R. Vijayaraghavan, Advocate Sh. Prabhat Lath, CA Sh. Deepankur Gandhi, CA For the Respondent : Dr. S. Moharana, CIT ORDER PER N.R.S. GANESAN, JUDICIAL MEMBER: All the appeals and stay petitions of the assessee are directed against the common order passed by the Commissioner of Income Tax (Appeals)-VII, Chennai, dated 30.12.2013 and pertain to assessment years 2007-08 to 2011-12. Therefore, we heard all the appeals together and disposing the same by this common order. 2. Shri N. Venkataraman, the Ld. Sr. counsel for the assessee, submitted that the assessee-company is engaged itself in the business of providing telecommunication services, namely, cellular services, data access services, etc. in various telecom circles in the country. A survey was conducted under Section 133A of the Income-tax Act, 1961 (in short 'the Act& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue authorities found that it is to be presumed that the work had to be carried out by a contractor and the payment for that work had been deferred to a future date falling outside the relevant accounting year. According to the Ld. Sr. counsel, Accounting Standard 29 issued by Institute of Chartered Accountants of India, enables the assessee to make a provision in the books of account, on an estimate basis, with respect to an expenditure like site restoration expenses. The Ld. Sr. counsel invited our attention to Accounting Standard - 29 issued by Institute of Chartered Accountants of India, more particularly para 14 and submitted that the Accounting Standard clearly recognizes a provision when an enterprise has a present obligation as a result of past event. It also recognizes a reliable estimate can be made of the amount of the obligation. According to the Ld. Sr. counsel, in fact, the assessee made a provision with regard to site restoration expenses in the light of the Accounting Standard - 29 issued by the Institute of Chartered Accountants of India. According to the Ld. Sr. counsel, the site restoration expenses creates an asset in the books of account in the name of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial year 2010-11 and the details of such reversals were furnished before the CIT(Appeals). Even before this Tribunal, according to the Ld. Sr. counsel, such details are available at page 181 of the assessee s paper-book. 8. Shri N. Venkataraman, the Ld. Sr. counsel for the assessee, further submitted that since the assessee could not identify the contractor and could not quantify the amount to be paid to the contractor for demolition of tower and restore the site, the entire mechanism for deduction of tax at source would fail. In other words, according to the Ld. Sr. counsel, the assessee could not identify the contractor and the amount of expenses that would be incurred after 20 years. Therefore, a provision made in the books of account by following the Accounting Standard - 29 does not require the assessee to deduct tax in respect of site restoration expenses. 9. Shri N. Venkataraman, the Ld. Sr. counsel, further submitted that Sections 194C and 194J of the Act require to deduct tax in case any amount is credited to a suspense account in the books of a person liable to pay such amount. The primary intent of introducing Explanation to Section 194C was to nullify the practice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit also could not be informed since no payment was made and amount was not credited in favour of any particular individual/person. Therefore, according to the Ld. Sr. counsel, the entire machinery for TDS would fail in respect of the provision made by the assessee for site restoration expenses. 11. Similarly, the Ld. Sr. counsel submitted that in respect of year-end provisions, the assessee could not identify the payee and could not ascertain the sum payable. Therefore, the assessee is not expected to deduct tax at the time of making provision. The Ld. Sr. counsel placed his reliance on the judgment of Delhi High Court in UCO Bank v. Union of India Others in WP(C) 3563/2012 and submitted that in the case before the Delhi High Court, certain deposits were made with a bank in the name of Registrar General of High Court, in terms of directions issued by the High Court. The issue arose before the Delhi High Court was whether the banks are required to deduct tax at source and issue certificates in the name of Registrar General. The Delhi High Court found that no TDS is required to be deducted as the ultimate beneficiary or payee is not identifiable. The Ld. Sr. counsel filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endering services like address verification, credit certification, content development, etc. At the year end, to close the books of account, the assessee estimates the amount of expenditure incurred in the month of March with respect to various services rendered by the service providers for which invoices are yet to be received by the assessee. According to the Ld. Sr. counsel, the provisions are made on estimate basis as it is not identifiable what amount is to be paid to such service providers. In other words, according to the Ld. Sr. counsel, the payee is not identified and the amount to be paid is also not ascertainable. Therefore, according to the Ld. Sr. counsel, the assessee is not liable to deduct tax in respect of provision made for year-end expenditure. The Ld. Sr. counsel further pointed out that when the new connections are offered throughout India in the month of March and the service providers would conduct customer verifications. At the year end, the assessee would know how many number of connections are offered in the month of March. However, the assessee would not know as to how many customer verifications have been done with each service provider engaged by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. According to the Ld. Sr. counsel, the word technical would take its colour from the word managerial and consultancy . Managerial services and technical services can be given by human only and not by means of any equipment. Therefore, the word technical has to be construed in the same sense involving direct human involvement without which the technical services cannot be held to have been rendered. The Ld. Sr. counsel invited our attention to an observation made by the Apex Court and submitted that whenever the services rendered without direct human involvement, it cannot be construed to be a technical service. The Ld. Sr. counsel has placed his reliance on the judgment of Madras High Court in Skycell Communication Limited v. CIT (119 Taxman 496) and submitted that the telecom services are not in the nature of technical services. 17. Shri N. Venkataraman, the Ld. Sr. counsel for the assessee, further submitted that in the case before Apex Court in Bharti Cellular Limited (supra), the revenue authorities obtained expert opinion from Sub-Divisional Engineer of BSNL in respect of the nature of service rendered by the telecom service providers. The Sub-Divisional Engineer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation of the TDS officer to verify whether the recipient has paid the taxes as required under the Income-tax Act. The Ld. Sr. counsel placed his reliance on Special Bench decision of this Tribunal in Mahindra Mahindra Limited v. DCIT (2009) (313 ITR (AT) 263) and judgment of Allahabad High Court in Jagran Prakashan Limited v. DCIT (345 ITR 288) and judgment of Karnataka High Court in Ramco (Bhel) House Building Co-operative Society Limited v. ITO in W.P. No.17037-43/2014. Therefore, according to the Ld. Sr. counsel, the roaming charges cannot be categorized as fee for technical services and hence, the assessee is not liable to deduct tax. 19. Shri N. Venkataraman, the Ld. Sr. counsel for the assessee, further submitted that orders for the first three years and three quarters of the fourth year are barred by limitation. According to the Ld. Sr. counsel, under Section 201(3)(i) of the Act, the Assessing Officer is expected to pass an order within two years from the end of the financial year in which quarterly statement was filed. Apart from that, Section 201(3)(ii) of the Act further provides that no order can be passed beyond six years from the end of the financial year in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure is kept under provision, the same would fall within the ambit of Section 194C of the Act. In other words, it has to be presumed that the work had to be carried out by a contractor and the payment for that work has to be deferred to a future date falling outside the period of relevant accounting year. Referring to Section 194C(2) of the Act, the Ld. D.R. submitted that clause (iv) of Section 194C(2) takes care of this kind of situation. By virtue of these provisions, it is crystal clear that if any amount of liability payable to the contractors is credited to any account, by whatever name it is called, then the assessee is liable to deduct tax as required under Section 194C of the Act. Therefore, according to the Ld. D.R., the contention of the assessee that it is only an provision is not justified. The Ld. D.R. placed his reliance on the judgment of the Allahabad High Court in CIT v. British India Corporation (P.) Ltd. (1973) 92 ITR 38 and also on the judgment of Madras High Court in CWT v. Crompton Engineering Co. (Madras) Ltd. (1983) 140 ITR 320. 21. Referring to the issue of year-end of provisions, the Ld. D.R. pointed out the assessee made provision for address ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advance Rulings found that the amount paid was for technical services, therefore, TDS has to be made. Referring to the issue of limitation, the Ld. D.R. pointed out that under sub-section (3) of Section 201, the limitation of two years is provided and it is applicable only where the statement under Section 200 was filed. Otherwise, the limitation is either four years or six years, as the case may be, from the end of the financial year in which the payment is made or credit is given. In the instant case, the quarterly TDS returns were filed by the assessee which do not contain the transactions which were disputed by the assessee. Therefore, the provisions of sub-section (3) of clause (ii) is not applicable at all. Therefore, the orders passed by the TDS officers are within the period of limitation. Hence, the contention of the assessee that the orders are barred by limitation has no leg to stand. 23. We have considered the rival submissions on either side and perused the relevant material on record. Admittedly, the assessee, a telecom operator, made provision for site restoration expenses, however, TDS was not made. The purpose for which the provision was made is not in dispute. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept the contention of the Ld. D.R. Accordingly, the orders of the lower authorities are set aside and this ground of appeal is allowed. 24. Now coming to the issue of year-end provisions, the contention of the assessee is that it is engaged in various services like address verifications, credit certification, content development etc. The assessee claims that provisions are made on estimation basis since it is not identifiable as to what amount has to be paid to the service providers. In case of new service connections, the assessee has to necessarily verify the customers address and identification. The claim of the assessee is that in the last month of the financial year, it is not known how many customer verifications have been completed and the exact amount required to be paid. However, on the basis of the past experience, the assessee is making an overall provision for incurring this expenditure. From the order of the CIT(Appeals) it appears that apart from identification and address verification, the assessee has also made provision towards ICU charges and lease line expenses, etc. From the order of the CIT(Appeals) it appears that the assessee also has to pay the variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer. The Assessing Officer shall re-examine the issue afresh as indicated above and thereafter decide the issue in accordance with law after giving reasonable opportunity to the assessee. 25. Now coming to roaming charges, the contention of the assessee is that human intervention is not required for providing roaming facility, therefore, it cannot be considered to be a technical service. We have gone through the judgment of Apex Court in Bharti Cellular Limited (supra), The Apex Court after examining the provisions of Section 9(1)(vii) of the Act, found that whenever there was a human intervention, it has to be considered as technical service. In the light of the above judgment of the Apex Court, the Department obtained an expert opinion from the Sub-Divisional Engineer of BSNL. The Sub-Divisional Engineer clarified that human intervention is required for establishing the physical connectivity between two operators for doing necessary system configurations. After necessary configuration for providing roaming services, human intervention is not required. Once human intervention is not required, as found by the Apex Court, the service provided by the other servi ..... 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